Oil Holds Near $67 as Market Tumult Subsides After OPEC Worries

Oil steadied near $67 a barrel as markets regained some composure following renewed trade tensions between the U.S. and China, political turmoil in Europe and simmering concerns that OPEC may ease its output curbs.

Futures in New York were little changed, though still almost $6 below last week’s high. China said it would respond accordingly to U.S. President Donald Trump’s plan to impose tariffs on $50 billion of Chinese imports. Encouraging economic data in Europe blunted panic related to Italy’s political crisis, which on Tuesday helped boost a gauge of oil market volatility to its highest level since February.

The market turmoil has weighed on oil, erasing all of the gains in West Texas Intermediate crude prices this month as the prospect of rising output from Saudi Arabia and Russia emerged ahead of a June meeting between the Organization of Petroleum Exporting Countries and its allies. The next clue about the state of the market’s fundamentals will come from industry data on U.S. inventories, due later today.

“There was a shock both with Russia and Saudi Arabia scaling back the cuts, together with Italy on top, that has been a nasty medicine for the oil market,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “My thinking is that there is still some more to go on this oil correction.”

WTI for July delivery, which rose as high as $67.15 a barrel on Wednesday, traded at $66.76 on the New York Mercantile Exchange at 11:56 a.m. London time. The contract settled $1.15 lower at $66.73 in the previous session.

Brent futures for July settlement traded 21 cents higher at $75.60 after losing as much as 0.8 percent earlier on the London-based ICE Futures Europe exchange. The contract on Tuesday rose 9 cents to $75.37. The global benchmark crude traded $8.84 more than WTI.

Trade Friction

The weakness in oil prices has coincided with a decline in risk assets, amid concerns about the renewal of trade tensions between the U.S. and China and the repercussions of Italy’s political turmoil. The Cboe/Nymex Oil Volatility Index added 8.4 percent on Tuesday, the biggest increase in a month. Implied volatility on second-month WTI options contracts hit its highest level since February.

China said it will hit back at the U.S. plan to move ahead with tariffs on $50 billion of Chinese imports, after the White House announced Tuesday that a final list of targeted goods will be released by June 15, with tariffs to be imposed “shortly thereafter.” Meanwhile, Italy’s escalating political turmoil has raised fears over the European Union’s cohesiveness. Billionaire George Soros warned of an “existential threat” to the bloc following the prospect of anti-EU, nationalist parties in Italy turning a repeat election into a de facto referendum on its membership of the euro.

In the Middle East, the energy ministers from Saudi Arabia, Kuwait and the U.A.E.’s will meet on Saturday, according to people with direct knowledge of the matter. Oil prices slumped after Saudi Arabia and Russia last week signaled they’ll restore some of the output they halted as part of a multinational accord to help erode a global crude glut.

Other oil-market news:

U.S. stockpiles are forecast to have declined 875,000 barrels last week, according to a Bloomberg survey of analysts ahead of government data on Thursday. Crude inventories in independent storage in Northwest Europe’s Amsterdam-Rotterdam-Antwerp trading hub rose to the highest level since at least 2013, according to weekly data from Genscape, a monitoring and analysis company. From West Texas pipelines to Oklahoma storage centers and Gulf Coast export terminals, the U.S. shale surge is crashing headlong into a barrage of bottlenecks.